Is Hong Kong still one of the best places in the world to set up a business?
As Hong Kong is a gateway to the mainland China, it is no surprise why a lot of foreign investors and companies set up their presences in Hong Kong. A simple taxation regime at a flat rate of 16.5% with a world-class business infrastructure, let’s not forget the fast and simple company set up, bragging Hong Kong to be a well-deserving 3rd easiest place in the world to do business is not of itself an over-statement at all.
In 2016, a total of 144,883 local companies were newly registered with the Hong Kong’s Companies Registry, and this represents an increase of over 4% comparing to the statistics in 2015.
Surprisingly, there are only 874 non-Hong Kong companies registered in Hong Kong in the same year, which is a slight decrease of 2.3% from 894 in 2015. One of the profound reasons is a lot of foreign investors’ bank account opening applications have been rejected by the banks as a result of elevated pressure today from more stringent anti-money laundering regulations and new compliance requirements. Apart from the local requirements, some foreign banks also need to comply with requirements or standards mandated by their head offices or overseas authorities. Some banks even outright refuse bank account applications from newly established unlimited companies (i.e. sole-proprietorship and partnership) and limited companies with sole foreign directors/ shareholders (i.e. those without Hong Kong Identity Cards including the Mainland Chinese). Opening bank accounts in Hong Kong by foreign investors and companies have seemingly become a real nightmare.
The Hong Kong Monetary Authority has recently become aware of this overly stringent practice and believes this could result in financial exclusion, particularly in respect of the need for bona fide businesses to have access to banking services in Hong Kong, and may drive foreign investors away from Hong Kong in a long run. In September, 2016, the Hong Kong Monetary Authority released statements inviting the banking and financial institutions to adopt a risk-based approach (“RBA”) in the implementation of anti-money laundering and counter-terrorist financing controls (the “Controls”) to avoid overly stringent measures that are disproportionate to the likely risk level of the customers, resulting in many unsuccessful account opening applications and/or unpleasant customer experiences. In 2017, we are expecting to see an improvement over the current situation.
We have extensive experience in assisting many overseas and Mainland Chinese investors in successfully setting up joint ventures, investment vehicles, branches, representative offices and various types of businesses and handling all business operations related logistics, such as bank account opening, in Hong Kong and China. If you are planning to have a presence in this part of the world, we are happy to take you through the business and bank account setting up procedures and offer you some practical tips to avoid all unnecessary hassles.
Authors: Alan Chiu, Managing Partner ([email protected])
Sander Ting, Consultant ([email protected])
Date: 1 February 2017
 World Bank’s Doing Business 2017 Report
 Press Releases – Number of newly incorporated companies remains high in 2016 -Companies Registry (http://www.cr.gov.hk/en/publications/press20170108.htm)